August 16, 2009 - An increase in the annual state application fee for tobacco vendors may cause many of them to stop selling cigarettes and cigars. The 900 percent increase for small vendors is part of the New York state budget. according to Jim Calvin, president of the New York State Association of Convenience Stores: The increase is so large that the real goal isn't revenue gain but to reduce the number of tobacco vendors by 40 percent.

The fees, which cover licensing for 2010, are due by September 20, 2009.

The annual fee will increase from $100 to $1,000 for stores with gross revenue of less than $1 million a year; from $100 to $2,500 for stores with revenue of more than $1 million but less than $10 million; and from $100 to $5,000 for stores with $10 million or more in gross revenue. according to Matt Anderson, a spokesman for the New York Division of the Budget: The new fees are expected to raise an additional $16.7 million for the state,The fee increase has some Rochester-area vendors considering ending tobacco sales."I have to look at the numbers again," said Paul Theodorou, co-owner of World Wide News on St. Paul Street in downtown Rochester. "They have made it really, really expensive. It's borderline now." Other vendors say they are likely to get out of tobacco sales. "I won't be selling cigarettes anymore. It won't be profitable for me," said Frank D'Ambrosia, owner of the Times Square Newsstand downtown.

The convenience store association, with 7,700 members, is lobbying for a fee reduction. It is also weighing legal action, said Calvin, holding out hope that the Legislature could reverse its action during a special session in September.

Anderson did not deny that a partial goal of the new fees is to reduce tobacco availability. "We view this as a public health issue," he said. But it will mean much more revenue for the financially strapped state government. The state estimates it collected $2.5 million in tobacco vendor application fees in 2008-09. It expects $19.2 million in the 2009-10 fiscal year.

One longtime political observer said the true consequences could give advantages to big businesses, which can afford the higher fees, while also driving some business out of the Empire State.

"If there's any place that knows how to kill jobs and businesses, it's New York state," said Michael R. Long, chairman of the New York Conservative Party and a former liquor store owner. "All they're really doing is chasing people out of state."

Moreover, consumers' cigarette purchases won't go down, said Long and Calvin, even though sales taxes on cigarettes are already high and $7.50 per pack is not an uncommon price. Half of the state's cigarette sales are made by Native American retailers or Internet sellers, both of which do not pay state and local taxes, said Calvin. The black market is also used by smokers, Long said, and some smokers stock up on cigarettes when they visit out-of-state retailers.